Five priorities for Metcash post-pandemic

Date : 17 March 2021

Nick Miles

Head of Insight - Asia Pacific

Metcash held an investor meeting on 16 March, announcing a trading update, as well as its ambitions for growth post COVID-19. We highlight what we believe to be the top five significant priorities for Metcash over the coming years.

1. Retain customers gained due to the pandemic

Metcash has undoubtedly benefitted from changing shopping habits because of the pandemic. Its network of over 5,000 independent retail outlets has provided shoppers with close to home solutions. The retailer also admitting that new and returning customers have been surprised by changes made in store over the past few years. In the first four months of its H2 FY21 supermarket sales and liquor sales continued to grow 14.4% and 19.6%, respectively. As the retailer starts to cycle tough comparative periods from last year, and as restrictions enforced by COVID-19 end, it will want to focus on retaining market share and customer gains. It will do this through continuing to invest in its Low Prices Every Day and strong brand campaigns, store quality, expanding private label and exclusive ranges, plus playing an active local in the community.

Source: IGD Research

2. Acceleration of network changes

IGA stores continue to benefit from the DSA program, with 590 stores or 45% of the network having been refreshed and average sales improvements of over 10%. It will continue to roll out DSA upgrades to 100-130 stores / year for the next five years, with 90% of stores completed by 2026. Alongside this, Metcash will be rolling out a new suite of store brands endorsed by its retailers. With each banner having national brand standards and a more consistent offer, it will help create clearer differentiation between channels and allow stores to be better tailored for shopper needs. Brands include Supa Valu IGA (large formats), IGA and IGA Fine Foods Market (core formats), The Local Grocer IGA and The Fresh Pantry IGA (small formats) and an alternative brand to the IGA suite, Village Grocer. Metcash will now focus on scaling Supa Valu and The Fresh Pantry format trials to roll out, with a target to transition to all the new store brands by 2024.

3. Grow eCommerce

Since launching IGA Shop Online last year, around 650 stores are now selling via the platform, with a target to expand this to around 800 stores by 2025. Metcash will continue to develop the service as a priority, with the roll out of an upgraded platform by the end of FY21. This will allow retailers to offer store specific ranging and promotions online, as well as new features to offer personalised experiences for shoppers. From an operational viewpoint, picking in-store will be controlled by a store specific app, with location-based pick routing software for greater picking efficiency. Delivery will be expanded via its new partnership with DoorDash and other options in the pipeline.

Source: IGA / Metcash

4. Amplification of loyalty

The retailer will be rolling out a new, digitally enabled IGA Rewards loyalty program that will provide a consistent solutions to increase loyalty across its total network. After trials in WA and Queensland, the initiative is now live in 200 stores and will be accelerated to the majority of the network. The scheme will allow retailers to use smart-driven marketing to target shoppers, using data based on in-store purchasing behaviours. Trials show that members visit stores more frequently and spend on average 80% more than non-members. With lots of Metcash's independent retailers already running their own loyalty programs, Metcash has said that the scheme will be complimentary to existing schemes. We will have to see how this plays out, having multiple loyalty schemes can create a messy experience for shoppers, as well as create conflicting data for the retailer. Whether more retailers gradually lose their old schemes in favour of this new, and i our view more powerful solution, will be interesting to see.

5. Driving efficiencies and more cost out

Metcash has continued to update its DC network, helping both provide better service to retailers and drive down CODB. Further investment in its systems have also helped it launch a new promotions platform, enter online and improve automation of tasks. The retailer continues to review its network with goals to reconfigure facilities to provide an expanded fresh and frozen range. It is also keen to collaborate more with key suppliers to share capability and improve efficiencies further. It will also optimise how it supplies customers either via its DCs or Campbells cash and carry stores, in order to do this at the lowest cost.